August 04, 1991|By John E. Woodruff | John E. Woodruff,Tokyo Bureau of The Sun

TOKYO -- Japan's embattled finance minister admitted yesterday that the head of his Tokyo political office helped three of the minister's friends get millions of dollars in fraudulent loans.

Yesterday's revelations severely threatened the already weakened tenure of Ryutaro Hashimoto, the finance minister, who has played a central role in relations between the Bush administration and the Cabinet of Prime Minister Toshiki Kaifu.

A week ago, Treasury Secretary Nicholas F. Brady went out of his way to express concern about damage to Mr. Hashimoto from the public outrage over his ministry's ineffectual regulation of stock brokerages, which have admitted paying out more than $1.3 billion in "compensation" to a few hundred favored big customers for losses in the 1990 Tokyo Stock Exchange plunge.

The governing Liberal Democratic Party has spent two months trying to limit damage and disclosures in the stock-brokerage scandal.

Yesterday's revelation was part of a separate scandal -- 23 loans worth $1.9 billion that add up to Japan's biggest-ever bank fraud.

Most loans were obtained when middle-management officials at Fuji Bank -- the world's fifth-largest -- and at two other banks helped to fake certificates of deposit that were used as collateral to obtain loans from finance companies.

Until yesterday, no one had suggested that the bank scandal might threaten any senior political figure.

But some aspects of yesterday's disclosures suggested that Mr. Hashimoto's role as head of the ministry that oversees many parts of Japan's financial community had been at least part of the background that made his secretary effective in dealing with the bank.

NHK, Japan's national television network, reported that the secretary not only helped Mr. Hashimoto's friends get the loans but also interceded later with Fuji Bank on behalf of customers who wanted to block a reported plan to transfer the officer who helped make the deals.

At an afternoon press conference hastily called after yesterday morning's Mainichi newspaper broke the first reports on his secretary's dealings, Mr. Hashimoto avoided directly answering questions about whether he might resign.

He said his aide, Toyoki Kobayashi, a former Tokyo municipal as semblyman who was until yesterday the personal secretary in charge of Mr. Hashimoto's Tokyo political office, told him he learned only Friday that the loans he helped arrange had been part of the fraud scheme.

"Even though [Mr. Kobayashi] himself did not know of the improper financing, I am also responsible for his supervision," Mr. Hashimoto said. "I deeply feel my responsibility."

At a Finance Committee meeting two weeks ago in the lower house of the Diet, Japan's parliament, Mr. Hashimoto rejected opposition members' calls for his resignation because of the stock-brokerage scandal.

"Resignation would not be enough," he said at that time, arguing that he should stay on to clean up the mess.

On Friday, Mr. Hashimoto spent seven hours before the Finance Committee of the upper house.

Putting the Finance Ministry in charge of regulating stockbrokers is "like asking a cat to guard dried fish," Seijun Murata, a Socialist Party member of the committee, sarcastically declared at one point Friday.

Mr. Kobayashi, who also met reporters yesterday, resigned immediately after giving Mr. Hashimoto a report on the transactions.

They included:

* A loan, said by Mainichi to be worth about $7.3 million, to an unidentified person variously described by Japanese news media as "an actor" and as "a TV talent agent." Some news reports said this person is "intimate with Mr. Hashimoto."

* Loans, said by Mr. Hashimoto to be worth about $1.8 million, to a person described by news media as the owner of an entertainment building.

* A loan, said by Mainichi to be worth about $1.1 million, to a person news reports described as a female restaurant owner.

Mr. Kobayashi said those three, and two other associates of Mr. Hashimoto who apparently did not get loans, had asked Mr. Kobayashi to help them borrow large sums of money. He said he responded in all five cases by introducing the people to Minoru Nakayama, who was fired from Fuji Bank along with two other officials on July 24.

Mr. Nakayama was in charge of the consumer division of the bank's Akasaka branch, in central Tokyo.

It was in firing him and the other two employees that Fuji Bank reported the fake-CD scheme and asked the police to investigate.

Two other banks, Tokai and Kyowa Saitama, later revealed that they, too, had been hit with similar fake-CD schemes.